Motley Fool Hidden Gems Investing - 6 Great Books for Investors

Episode Date: April 5, 2022

April is Financial Literacy Month and we've got some recommendations to make you a smarter investor! (00:20) Anand Chokkavelu mentions a couple of popular titles investors may want to skip, before he recommends the following books: Liar's Poker - Michael Lewis The Big Short - Michael Lewis (Shameless Plug Alert!) The Motley Fool Investment Guide - David and Tom Gardner The Little Book That Beats The Market - Joel Greenblatt One Up On Wall Street - Peter Lynch Beating The Streat - Peter Lynch (10:00) Alison Southwick and Robert Brokamp talk with best-selling author Ron Lieber about how to help your kids be smarter about money (without looking like a jerk). Host: Chris Hill Guests: Anand Chokkavelu, Alison Southwick, Robert Brokamp, Ron Lieber Producer: Ricky Mulvey Engineer: Rick Engdahl, Tim Sparks Learn more about your ad choices. Visit megaphone.fm/adchoices

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Because we have your number. Chris Hill. It's Financial Literacy Month and we've got some recommendations for your reading list. Motley Fool Money starts now. I'm Chris Hill joined by Anand Chakravallu, long-time Motley Fool Editor Analyst and currently the Livestream Programming Director. Thanks for being here. Anand Chakravallu. Thanks for having me, Chris. Excited. I mentioned this the other day to David Gardner. April is Financial Literacy Month, and you're one of the more voracious readers I know at the company. I wanted to talk with you and provide for the dozens of listeners some book

recommendations. I'll just say upfront, the books we talk about, they're going to be listed in the show notes for this episode. We'll go through these books pretty quickly, but the full list will be in the show notes. You and I were talking earlier, and you brought something up which I thought was a great point, and I'd like to start here, which is, hey, it might be helpful to start by a suggestion of what not to read, because there are a lot of great books that you can read to become a better investor, but that doesn't mean you should necessarily start with any book. Yeah. If you do a Google search and you look for lists of the best investment books, frequently the Benjamin Graham books are like one and two, the Intelligent Investor and Security

analysis. And to be clear, I mean, he was Warren Buffett's mentor. It's a truly great, you know, set of books. But one, it's outdated. He used to update these every like five years or 10 years. It's been like 50 years since Intelligent Investor was updated by him. And, you know, so things change and it's a very value investing, you know, deep net net type of stuff. And the other thing is just, it's so dense. If you're a first-time investor and you're just trying to learn just some basics, you'll get intimidated most likely, and you'll just stop on page three, and you might lose two years. So no disrespect to Benjamin Graham, but yeah, probably not the place to start. Part of our conversation earlier was about how there are

books out there that aren't really how-to-get-started investing books, but they can still be enjoyable reads. Brad Stone, who we had on the show last year for his book, Amazon Unbound, Brad Stone's a great writer. That's a great book, made a lot of best business books of 2021 lists. It's not really going to help you be a better investor. It will make you a more informed Amazon shareholder, if you happen to be an Amazon shareholder. But sort of in that same category, you said, you know, there are books that are sort of fun looks at Wall Street, too. Yeah. So, you know, the Michael Lewis books, which are actually kind of useful, like Moneyball and things like that. But the first one I read was Liar's Poker, which was his first book about his

time at Salomon Brothers, which, you know, I know, Chris, you were going to talk about the big short. And this is kind of the prequel because a lot of the the mortgage stuff, the securitization and chopping up of mortgages was happening there with like Louis Ranieri and and the other folks there. And Michael Lewis had a front row seat there. So he recently got the audio book rights back, if I remember right, because I just went through the audio book after I read it like 20 years ago. And Michael Lewis actually narrates it. And then he's got a companion podcast on his Against the Rules podcast. He's got a little module called Other People's Money, where he brings on folks like the human piranha from back in the day and reveals who they are and talks to them all these years later. So that combination is a really good, interesting look at Wall Street and incentives. A lot of these things happen because of incentives. And that's kind of

a through line of a lot of Michael Lewis' books. For my money, probably the best nonfiction writer in America. The Big Short is not just great writing and brilliant storytelling of the very small number of people who saw the 2008 financial crisis coming and invested accordingly. But I do think that book also offers for any investor a clear-eyed look at how pervasive groupthink is on Wall Street. That even though there are smart people saying, now, I really think the sky is falling, there are so many people who are just like, no, fine with the housing markets. No, it's totally fine." I think for investors, one of the lessons there is, sometimes you have to get comfortable with the idea that you're really going to be

swimming against the tide because there will be a lot of people swimming against you. In terms of investment books, a little bit of a shameless plug here, but I think there's a reason the Motley Fool investment guide holds up over time. Yeah. It was written about 20 years ago, and now the third edition was 2017. That's the one you want because it's updated. We were debating whether to put this on because it is a shameless plug, but it really is the answer that I give people. Some of our older books, it just doesn't resonate as well right now, or they might be on specific topics, this investment guide gives a really good broad view, not just of Foolish investing, but just the different kinds and the different things you can do. It really is what

we use to teach new Fools. We've had book clubs and things like that to help teach people the Motley Fool investing strategies. You and I have been at the company long enough. I think we are both, among other things, disappointed when we encounter people in life who, when we talk about where we work and we talk about stock market investing, it's disappointing when you meet someone who's like, it's a big casino. Buying a stock is like buying a lottery ticket. There are books out there that really do try and teach around the idea that now you're actually becoming part owner of a business. You had a book that I think does a a very good job of that. Yeah. So like the best book for, you know, the old quote,

buy businesses, not lottery tickets, is Joel Greenblatt's The Little Book That Beats the Market. It really is a little book. It's super tiny, super quick read. You can read it in like, I think, two hours. It's been a while. But it just lays down kind of the simple ways of exactly how you can evaluate a business using just a couple metrics. It's pretty incredible what Joel Greenblatt did with that book and the way it caught fire. Because you have to believe, at least for a lot of people, I mean, we started by talking about Benjamin Graham, if you're just starting out and maybe you're intimidated about investing on your own for the first time, then there is something very attractive about just literally a small book.

Yeah. You know what you don't want to read is Joel Greenblatt's much, well, I'll give you the title, you can be a stock market genius, which definitely sounds more appealing, but it's a lot about special situations investing. It's definitely a worthwhile read, but definitely after you've had a few years in the game. So along those lines, when you've been investing a little bit on your own, you've got a bit more experience. I was pleasantly surprised that when we were chatting back and forth earlier today, you mentioned Peter Lynch. Yeah. And a lot of people use Peter Lynch as, hey, that's the first book you should read. And I remember reading him years ago. And frankly, a lot of the things, you know, upon rereading,

you're like, oh, I didn't catch that nuance. And I didn't, you know, Peter Lynch, the fundamental thing you learn from him is, hey, look, anyone can do this. And a lot of times it's just, you know, hey, I went to this store at the mall and it's really doing amazing business. Maybe I should start researching that business. Not just buy it, but just as a thing to research, right? But so his two books that are really good for this are One Up on Wall Street and Beating the Street. I'd recommend after you've been in the game for a few years, start reading those. And for example, he's got just great ways to how to evaluate a bank stock, right? For a first-time investor, that's a little rough, but after you've done it for a while, it's just great tips.

Thank you for making the distinction, because there are times when I hear people reference Peter Lynch and they don't make the distinction that you just made, which is a very important one, which is they sort of brush off Peter Lynch as, oh, I went to the mall and I went by this store and there were a lot of people shopping at it, so I bought the stock. It's like, no, that's not at all what Peter Lynch was trying to teach people. He's trying to teach you that And that can be a point for generating an idea, but then you've got to go do the research. You can't just be like, oh, well, I shop there, so therefore everyone shops there, right? Yeah, so easy.

Anand Chakrabartyapaloo, thank you so much for being here. Thank you, Chris. In keeping with the financial literacy theme, we're going to check in with bestselling author Ron Lieber. He writes the Your Money column for the New York Times, and he's written several books about personal finance. Alison Southwick and Robert Brokamp recently caught up with him to talk about some of the toughest financial questions that kids ask.

Fortunately, Ron's given a lot of thought to helping kids be smarter with money. So before we get into the tough questions to answer, I want to read a quote from your book. the opposite of spoiled, raising kids who are grounded, generous, and smart about money. And so you're talking to the reader, explaining the big takeaway for teaching your kids about money. This isn't a huge spoiler, don't worry. You write, every conversation about money is also about values. Allowance is about patience. Giving is about generosity. Work is about perseverance. You go on from there. And as a parent, when you get tough questions from your

kids about money, you might want to bumble through them as quickly as possible because talking about money can be complicated. But your point is that money conversations give you an opportunity to actually instill or reinforce bigger values for how to live a good life. Can I just get you to react to that? Like, how did you, how did you come, come up with this? Well, this was the thing I, you know, for some authors, um, you know, an ideal hit you perfectly formed, um, like a bolt from the blue. Um, the money books that I've written haven't been like that at all, right? Because there's a lot of money books out there and there's a lot of basic personal finance, as we all know. But, you know, if I've been good at anything the last decade,

it's been trying to kind of tap into the emotional wellspring and the complicated feelings around money. So for this one, you know, the, you know, kids and money and allowance and spending and saving, you know, it felt kind of dutiful, but I know every parent wants their kids to have good values. And what I eventually realized after thinking about it for years after I first thought that there was, you know, space for another approach on kids and money, what I finally realized is that like the basics of saving and spending and giving, those are really just proxies for, well, you know, saving is about patience and perseverance. Spending is about modesty and prudence and thrift, right? Giving money away, charity, that's about generosity

and gratitude that you have more than enough, right? And hanging over it all is curiosity, not just about money, but about how the world works, right? And a perspective on your place in the world and how you arrive there. And it turns out that all of these things are things that kids are wrestling with the moment that they first ask about money.

And it was making those connections that really put some kind of fire behind my tail. Yeah. So through the lens of instilling values, when you're having money conversations with your kids, you're here to help us answer a few common and tough questions that every parent is going to be asked at some point by their child. So let's start with one of the first questions about money from your kiddo that initially sort of stumped you. And it was your, I believe your kid was three years old at the time, and you just visited some friends who had rented a house for a vacation. and I'll, I'll let you finish the story. Yeah. So we're in the car one day and like literally

apropos of nothing, right? You know how these like non sequiturs come up if you have kids or nieces or nephews or you're a teacher and just like out of nowhere, she asked daddy. And of course she's addressing me, even though her mother's in the car, somehow she sensed that, you know, I'm the person who plays Dr. Money in the newspaper on the weekend. She says, daddy, Why don't we have a summer house? And I was just like sort of stopped cold because, you know, we couldn't afford a summer house. And the point at which it began to be something we might even think about, you know, was clear that we were going to make different choices with our money for a long time to come. And so we haven't been talking about this. How did she even know that such a thing existed? it. Right. But the other thing about it was that it sort of cut to the core of not just her own

curiosity about the world, but specifically about her parents as sort of like economic players in a larger marketplace. Right. Who are these people that I have been born to? How do they make decisions? What's important to them? What tradeoffs are they making? And, you know, why are there some people that have this thing that I would like to have, or that seems kind of fun, right? And these people who are in charge of me have made this choice, and maybe I don't agree with it, right? I think all of that was swirling around her 42-month-old brain. And that question was her way of articulating it. And the fact that I couldn't answer her was not only personally embarrassing to me in front of my spouse, who thought the whole thing was hysterical, right?

But I felt like I was failing her and ultimately kind of failing the world to the extent that I hold myself out as any kind of money expert, not to have a script to react to that. So I had to build one. All right. So then how do you answer that question? How did you answer that question when you had a chance to think about it? I was stunned into silence. I, you know, I'm not sure what I said, but, you know, it was right after that that I started thinking about the fact that I needed to build these scripts for myself. and my parents and for other parents. Right. And, you know, the, the first thing, um, that I came up with, uh, you know, which I now suggest to everybody is just to, you know, answer any such

question with another question, right. Which is why do you ask, you know, it's not meant to be an accusation as if there's something wrong with expressing your child like, or actually child ish or child curiosity in that way, to make them feel like their inquiry is in fact welcome. Because not only may the question really ultimately be about something else entirely, and this is just their way of articulating it, but by responding to a question with a question, it's a stalling mechanism that kind of gives you time to get your act together to respond in a way that's age appropriate and also values driven. All right. So now that you know what to say, how would you answer that question?

Why don't we have a vacation home? I guess I would say this, right? Well, there are lots of different kinds of homes. Some cost more than others, and some people have more than one if they're really lucky or if that's a choice that they've made. And someday we may be able to or may want to make a choice like that. But right now, we've chosen to spend the extra money that we have on other things. And then just see if they follow up, right? One of the tricks here is not trying to answer other questions that they're not asking, you know, in our sort of nervousness about the fact that we've been called out or asked a thing that we're not quite sure we know how to handle or know the answer to, right? So

keep it short and simple. And if they have other questions, they'll ask them. But often short and simple is enough to satisfy them. All right. Here's our next question. I believe this is one that I have bungled. Uh, my daughter asked me, mom, how much do you make? She was like, let's say six years old at the time. And I just flat out told her, I don't know. I think that was maybe wrong. Uh, I, I don't think it's wrong to tell them the answer, uh, you know, at, at, at a teenage age. And, you know, the risk that you, the risk that you take, you know, when you're talking to a kid with like a single digit age is they might go and repeat that information and maybe they'll bungle it and get it wrong. Now, you know, the concern there is that, you know, other kids or

other parents might feel like you're bragging if you earn a lot of money or that you're just like weird. You know, kids will share that information at inopportune moments in inappropriate ways because they're kids, right? So that's the risk. To my mind, the right answer to the question is this. That is a great question. Why do you ask, right? And then give them an opportunity to say where the inquiry came from. Because it could be because they're scared, right? Maybe they overheard a conversation on the phone or a conversation with your spouse, if you have one, or your ex if you have one of those right and they just sort of like misconstrued it right or maybe they overheard something crazy on the playground and now their brains are all scrambled right so

give them a chance to explain themselves but i think the right answer is i'm so glad you asked that question um i or we if it's two of you intend to tell you the answer when you're 16 or 17 18. but first there's a whole bunch of stuff you have to learn so let's start now right if this is the the beginning of the process, right? It begins with allowance and saving and spending and giving and trade-offs. And then you want to introduce them to all sorts of manners of, you know, household budgetry, right? You know, the grocery bill, you can put them in charge of the electric bill for a year and then teach them about insurance, right? And if that doesn't bore them to death, then there's a whole high school long conversation you can have about discretion,

right? About not telling your sibling secrets or your friend's secrets on social media, on not repeating things that your parents say in an inappropriate way. And then and only then you have the conversation with them where you say, okay, we're ready. But you should know that if you repeat this out in the world, there's a pretty good chance that people are going to think you're an a**hole.

Right? And no teenager wants to flunk the a**hole test. So at that point, they're ready. But only then. When they're old enough for you to say the word a**hole in front of them, that's when you know You can tell. Can we even say that? Are we bleeping that? Is that what we're doing? Insert more appropriate word there, if you wish.

One of the keys from your book, Ron, is that money shouldn't be a taboo subject. So any questions that they have, you can answer them and have good open discussions about it. I am curious, this question about how much do you make? We're a couple of years from a recession where some people lost their jobs. And how much do you talk about that with your kids? Because on the one hand, they should be aware of the financial situation. On the other hand, you don't want to burden them with anxiety that they may not be old enough to really handle and understand. Yeah, it's a tough one. I think, first of all, we need to honor and respect the fact that they almost always know more than we think they do. And if you've lost a lot of income or lost all

of your income, there's a pretty good chance that you're talking about it more than you think. And even if you aren't, you know, your kids may be reading over your shoulder or picking up your phone, or there may be documents laying around that kind of give them a sense of it. You know, obviously if you're sort of food insecure or housing insecure, they know that, or they're sensing, you know, if you have to move someplace cheaper or change what you eat, that, you know, something may be changing, right? So, so the fact is, is that they are aware and I think not addressing it head on can have the effect of creating more anxiety, not less, which is not what we want to do as parents. So, you know, to the extent that you think that they are aware,

or if they are older and, you know, ready to have this conversation, you know, you can say different versions, age appropriate versions of the following. Hey, I know that you're aware of what's going on here. I am almost, or we are almost positive that things are going to end up okay. And you don't need to worry about the basics. And here's why, right? We may have less money than we used to. We may have less money right now, but we continue to be rich in health, in friendships, in family, in community support, in terrific teachers and administrators, your schools, um, you know, who can help if we need it. Uh, I, we are not worried and we don't want you to be worried either. And we want you to know that it's okay to talk about it, to ask

questions, to be sad or to be mad at us, that all of that is okay. Um, and that you shouldn't keep it to yourself. It is crazy how much kids, um, will absorb and, you know, their brains just keep working on it. And I'm reminded of a story my mom tells. And so she is a woman who is now on in years. Since I am on in years, it follows that she is as well. And she still tells this story several times. And you can tell that she's still emotionally very turned around over it. When she was a little girl, her mom says, they're at the store, and her mom just happened to mention, well, this is my last $20. Her mom meant, this is my last $20 in my wallet. I'm going to need to go to the bank. Don't worry about it. But all she said was, this is my last

$20. And my mom, as a little girl, thought, this is our last $20 in the world. I'm not sure if it's because of this exact moment, but to this day, my mom remains an extremely frugal person. But if her mom would have had this longer conversation, this is not my last $20 in the world, darling. We have more in the bank, but this is my last $20 in my purse. How different would that have stressed out this poor little girl? It's so funny how kids' little brains work and how it sticks with them. Those conversations at that young of an age, decades, many decades later, my mom is still remembering the fear that she felt. Yeah, it's totally true, right? And I think the thing that we have to remember because particularly if we're older parents we're in the

process of like forgetting stuff even more than we're learning stuff right is that they're just little sponges and it is their job to puzzle out how the world works and money is a not small part of how the world works whether we like it or not and so of course they're going to have hundreds of questions and some of their confusion may go inarticulated for years. We just have to be watching for that. It's not like something we should be obsessed with, but you should think about it a couple of times a week as the appropriate moments come up to interject a 15-second lesson or explanation or whatever. All right, Ron. Well, we have run out of time for this week. This has all been great, but we actually have way more questions that

that we want your help answering. So could you come back next week? I can come back next week. All right. Wonderful. We'll see you back next week with maybe even harder questions to answer. That's all for today, but coming up tomorrow, we've got a bull versus bear debate on a retail business that has defied expectations. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. I'm Chris Hill. Thanks for listening. We'll see you tomorrow.